ltradiofandomcom-20200213-history
User talk:Tcatt57
A more comprehensive look at the evidence, however, indicates that, while the dividend and capital gains tax cuts were indeed correlated with the upturn in the recover, they were not the cause ''of the improvement. In painting a simple picture of coincident timing, the Treasury documents omit many relevant facts, such as information regarding: *'Likely economic conditions without the tax cuts. By the beginning of 2003, a number of significant factors were aligned to support the recovery, including very low short-term interest rates. As a result, as of early 2003, various expert observers, including Federal Reserve Chairman Ben Bernanke and economists surveyed by the Wall Street Journal, were predicting that GDP and investment growth would accelerate in 2003. Furthermore, the President’s own Council of Economic Advisors was predicting a significant increase in employment growth starting in 2003, even without additional tax cuts. In fact, while the Treasury report emphasizes employment gains that it implies are due to the 2003 tax cuts, actual employment at the end of 2005 was significantly below ''the level CEA predicted it would reach ''without the tax cuts (see Figure 1). *'''Implication of Treasury claims. Had the current recovery continued on the path it was on from November 2001 through mid-2003, it would have been the weakest recovery since World War II. In other words, by implying that the economy would not have improved without the 2003 tax cuts, Treasury is in essence claiming that, despite aggressive monetary policy by the Federal Reserve and significant tax cuts enacted in 2001 and 2002, this recovery would have been the worst in half a century. As noted, this was not the consensus among economists at the time. *'Experiences in other recoveries.' The path that the recovery followed after the recession in 2001 was very similar to the path of the 1990s recovery. Like the current recovery, the 1990s recovery was initially relatively weak, and growth accelerated about 18 months after the recovery began. In the case of the 1990s, however, the improvement was more pronounced than in the case of the current recovery, and the stronger growth coincided with a tax increase. If every economic change that followed a tax change was caused by that tax change, then the 1990s experience would show that tax increases provide more potent economic stimulus than tax cuts. The more appropriate lesson to draw may be that initially weak recoveries eventually tend to improve, independent of tax policy decisions. *'Economic theory and evidence surrounding capital gains and dividend tax cuts. '''Capital gains and dividend tax cuts are generally understood to be “supply-side” tax cuts — that is, even if they “work,” their effects are felt in the long run, not as short-run economic stimulus. The Congressional Budget Office, for instance, found that “little fiscal stimulus would be provided by cutting capital gains tax rates.”[2] Conservative economist Gary Becker, a supporter of the dividend tax cut, wrote that it “will not yield immediate benefits…. Any short-run stimulus from eliminating the dividend tax would be too weak to have a significant benefit to the economy.”[3] Kevin Hassett, another conservative economist who supports the dividend tax cut, has called it “preposterous” to claim that reducing taxes on dividends created millions of new jobs.[4] Some supporters of the capital gains and dividend tax cuts argue that they boosted the economy in the short run by boosting the stock market. A Federal Reserve study, however, found that the dividend and capital gains tax cuts were ''not the reason the market rose in 2003. (Not surprisingly, the Treasury report did not cite this Federal Reserve study.) *'Historical Norms.' Even if one were to grant the claim that the tax cuts caused the improvement in the recovery, this would not establish that tax cuts are strong engines of growth. The current recovery, despite at least one major tax cut every year for four years, remains weak relative to past post-World War II recoveries. This means that the Administration and Congress have expended over $1 trillion in tax relief (through 2006), and wracked up correspondingly large budget deficits, without producing even an average economic expansion. By trying to link the dividend and capital gains tax cuts to improvements in the economy since 2003, the Treasury Department presumably hopes to bolster the case for extending these tax cuts beyond their scheduled expiration at the end of 2008. Yet, even if one were to accept its findings, the Treasury report fails to build a compelling economic case for extending the tax cuts. If the main goal of these tax cuts were economic stimulus, and if they had succeeded in stimulating the economy, then the appropriate response would be to let them expire at the end of 2008, by which point they would have had ample time to work. The more serious economic claims on behalf of the tax cuts, however, have to do with their effects on long-run growth. The real question is thus how these supposed positive growth effects compare with the negative effects of the increased deficits that would result from extending the tax cuts without paying for them. (While some have tried to argue that these tax cuts “pay for themselves” and thus do not add to deficits, this claim is inconsistent with the evidence and rejected by respected institutions such as the Congressional Budget Office; see the Appendix.) The negative effects of the resulting deficits on long-term growth may equal or outweigh any positive effects of the tax cuts. The Congressional Research Service, for example, found that the dividend tax cut “would harm long-run growth as long as it is based on deficit finance.”[5] The Treasury report ignores these issues, emphasizing instead its simpler, rosier pictures. Improvement Expected with or without Tax Cuts Contrary to tax cut boosters’ claims, there is no reason to believe that, without the tax cuts, the recovery would not have improved. Rather, there is good reason to think an upturn was likely regardless. *Already, in January 2003, before the capital gains or dividend tax cuts were even proposed, the Wall Street Journal’s survey of economists found that most thought “a modest economic recovery should take firmer root in 2003, led by businesses expected to pour their recuperating profits into investment.”[6] *Similarly, in February 2003, then Federal Reserve Board Governor and current Federal Reserve Board Chairman Ben Bernanke predicted “an increasingly robust economic recovery during this year and next” because of firms’ need to replace old capital, improvements in business cash flows, and diminishing uncertainty about geopolitical events.[7] *In addition to the factors named by Bernanke, various events that coincided with the 2003 tax cuts may have played a role in strengthening the recovery. For example, the Federal Reserve Board lowered interest rates to a 41-year low and oil prices fell, both in the same quarter as the tax cuts. *As of February 2003, the President’s own Council of Economic Advisors was predicting that employment growth would accelerate significantly beginning in 2003 — even without a new tax cut (see Figure 1 on page 1). At the end of 2005, total employment was more than four million below the level CEA predicted it would reach without the President’s proposed tax cut (and more than six million below what CEA forecast with the President’s proposed tax cut in place).[8] An improvement in the economy thus was expected before the dividend and capital gains tax cuts were enacted. And it was not expected that the in the absence of these tax cuts, the recovery would remain as weak as it was at the start of 2003. If average growth rates had remained as low through the end of 2005 as they had been from the beginning of the recovery through mid-2003, growth in the Gross Domestic Product (the best measure of the size of the economy) and consumption, non-residential investment, net worth, wage and salary, employment, and revenue growth would all have been weaker in the current recovery than in any previous recovery since the end of World War II. People can rant and rave, back and forth, but the fact remains the Stupak or Stupid amendment is Unconstitutional, Period. It would be immediately challenged and defeated. These corporations are laughing at us arguing over pennies while they pilfer trillions. Because of an accident I have been involved intimately with our health care industry since 1985, of which none of those services I received exist today, because insurance companies quit paying for many, many necessary rehab and basic services that have decimated the quality of care on one end. Simultaneously they have jacked premiums and bleed families bankrupt on the other end. Besides destroying a very capable health care industry and bankrupting millions, insurance companies have corrupted the political process. For a real Eye Opener go here: http://www.lafn.org/gvdc/Natl_Debt_Chart.html#DownloadChart. SEEING IS BELIEVING =The Bush Tax Cuts: How have they affected tax revenue?= The Bush tax cuts contributed, along with underlying economic conditions, to a historic decline in federal tax revenue. In 2000 total federal tax revenue was as high in proportion to the U.S. economy as it had ever been. By 2004 federal tax revenue in proportion to the economy had fallen to its lowest level in almost fifty years. *In recent decades the federal tax take has generally fluctuated between 17 and 19 percent of gross domestic product (GDP). By 2000, however, total federal tax receipts had reached 20.9 percent of GDP, their highest level since 1970 and matched only in 1944, when the federal government collected 20.9 percent of GDP in taxes at the height of fighting World War II. By 2004, however, federal tax receipts had fallen to 16.3 percent of GDP, which is not only the lowest level since 1970, but the lowest since 1959. *Most of the decline in the ratio of federal tax revenue to GDP can be traced to the individual income tax. From 1970 to 2000 these taxes were typically in the range of 8 to 9 percent of GDP. In 2000 individual income taxes were 10.3 percent of GDP, their highest level ever. By 2004 individual income taxes had dropped to 7.0 percent of GDP, their lowest level since 1951. Total federal tax revenue declined by 4.6 percent of GDP from 2000 to 2004; of that total, 3.3 percentage points, or almost three-quarters, was due to the decline in individual income tax revenue. *Most of the remaining decline in the revenue-to-GDP ratio resulted from a drop in the share in total revenue coming from corporate income taxes, which fell by 0.5 percent of GDP from 2000 to 2004, and a drop in the share coming from the payroll taxes that finance Social Security and Medicare, which declined by 0.4 percent of GDP over that period. http://www.bir.gov.ph/lumangweb/ann_collperf.html